Method of doing business for auctioning a defaulted loan

ABSTRACT

A method of doing business includes identifying an owner of property willing to sell his property by an online auction, entering into a contract with the owner obligating him to complete the sales of his property conducted pursuant to terms of the contract; pre-arranging a minimum auction price for his property that accounts for the owner&#39;s interest, plus costs and fees, conducting the on-line auction with a plurality of bidders for his property whereby at the on-line auction&#39;s conclusion there is a winning bidder and ensuring the transfer of the winning bidder&#39;s funds to the escrow holder.

This is a continuation-in-part of a provisional patent application filed Jul. 7, 2007 under Ser. No. 60/958,887.

BACKGROUND OF THE INVENTION

1. Field of the Invention

The present invention relates to a method of doing business for auctioning a defaulted loan. The present invention relates generally to a method for assisting an owner of a promissory note in default and more particularly to a method for assisting said note owner including the steps of selling said defaulted note by means of an auction using an internet web portal as an auction site.

2. Description of the Prior Art

U.S. Pat. No. 7,213,001, teaches a method for restructuring a debt of a debtor who has an interest in a distressed property by a third party. The method includes the steps of comparing a present appraised value of the property to a total cost for purchasing the property from the debtor by the third party, satisfying the personal debt of debtor by the third party, and reselling the property back from the third party to the debtor based upon a present appraised value of the property, and if the present appraised value of the property exceeds the total cost to the third party by a pre-selected value then the third party purchases the property from the debtor, satisfies the personal debt of the debtor and resells the property back to the debtor at the present value of the property. The vast majority of homes purchased are purchased on a the basis of loan instrument which includes a promissory note that specifies a principal amount borrowed from a lender and an interest rate, and is secured by a mortgage or deed of trust on the property. The promissory note establishes the borrower's obligation to make periodic payments to the lender and the mortgage or deed of trust establishes the lender's right to foreclose on the property in the event the borrower fails to make the scheduled period payments.

When a person or entity borrows money from a lender, the borrower must sign a promissory note promising to repay the home loan and a mortgage note (or deed of trust) to serve as collateral for the loan. The bearer of such notes has a legal claim to the underlying property until the bearer is paid in full. To insure a continuous supply of available funds, the lender will often sell groups of notes (mortgage loans) to investors. This selling of mortgage loans to investors is referred to as the secondary mortgage market.

Under most circumstances, the borrower completes the loan obligation by making a lump sum payment before the end of the period to satisfy the loan. However not all borrowers can consistently make loan payments. Often times an acute event or circumstance may cause the borrower to stop making payments. Any number of unforeseen financial hardships may cause the borrower to suddenly stop making payments and default on the loan.

As a result of the borrower's default the lender may foreclose on the property. Foreclosure is a legal process by which the lender will ultimately obtain title in property and resell the property. From the borrower's perspective foreclosure is traumatic both from a financial as well as emotional standpoint. From a financial standpoint, the borrower not only loses the equity which has been established in the property but even after the property has been foreclosed continues to suffer in the sense that the borrower's credit has been irrevocably damaged. From the lender's perspective, foreclosure is also undesirable. The foreclosure process is costly and thus further increases the lender's interest in an already distressed property. In addition, unless the ultimate sale price of the home after foreclosure is at least equal to the original value of the home the lender's return may be compromised. Prior to foreclosure or subsequent thereto the borrower may file for bankruptcy. Ultimately however the result is the same in that the bank will foreclose on the property once the payment schedule has not been met. Accordingly, foreclosure and its resultant hardships discussed above are not avoided by the borrower filing for bankruptcy. Moreover, by filing for bankruptcy, the borrower's credit will likely be damaged to point where obtaining any future loan will be extremely difficult thereby preventing the homeowner from purchasing a future home.

From the lender's perspective, bankruptcy is also not a desirable alternative since bankruptcy is a complicated legal proceeding and has associated legal fees and costs and, most importantly, a delay in the collection of the loan.

In view of the above it is desirable to seek techniques that would ensure payment of the loan to the creditor without the need to rely upon either foreclosure and/or bankruptcy proceedings.

U.S. Pat. No. 5,966,699 teaches a computer system that conducts an electronic loan auction over a computer network such as the Internet. The computer system includes a computer connected to the Internet, which performs the following functions of receiving an electronic loan application form from a prospective borrower, providing such application to a loan authorizer's computer over the computer network for approval, receiving an electronic message from the loan authorizer's computer indicating whether or not such loan has been approved, entering the loan application into a database that is accessible to lenders via the computer network, if the loan is approved; and maintaining the loan application in the database for a predetermined period time during which lenders may submit bids and the borrower may accept a bid.

U.S. Pat. No. 7,127,406 teaches an apparatus and method implements, manages and tracks on-line digital transactions via an escrow, including opening, servicing, real-time or near-real time status of the broker, a title company, lender, vendor, buyer and seller, and closing of an escrow via a medium such as the internet. Multiple access methods are employed. The present invention provides computerization and internet type process implementation for escrow processes including, but not limited to, digital transaction coordination, digital status coordinators, seamless escrow transactions, on-line digital signatures, video signature authentication, digital certificate authentication, signature authentication, satellite and other wireless transmission of escrow transactions, voice digital instruction, the merging of voice with digital data transactions, set-top/web-TV digital escrow transmission, global digital escrow networking, and the like. The system includes appropriate data, application, and servers along with supporting LAN or WAN-based application to perform escrow services. The method of doing business in realty uses on-line communications and includes the steps of providing an on-line escrow account for parties to a transaction; providing on-line transactional account management services with respect to the on-line escrow account for the parties; and providing secure access to the on-line escrow account limited to the parties and third parties using on-line identification authentication. The system includes the use computerized devices and communication devices connected to the Internet which performs receiving instructions for the opening of an escrow; providing and sending digital instructions to all parties involved in the transaction; offering the availability of a continuous digital escrow transaction by coordinating and permitting access to the on-going status of an escrow in progress; on-line digital signature, voice, video fingerprint or retina scanning personal identification authentication; transfer of funds or other consideration; submission of loan documents; closing escrow, delivering clear title, and release of transaction funds; and the like as would be useful in an escrow transaction.

U.S. Pat. No. 7,069,234 teaches a method of initiating an agreement in an e-commerce environment. Across the many ‘exchange of value’ sites, there are three prevalent selling models: seller-centric, buyer-centric, and auction. The seller-centric model is the most common. In its simplest form, a company typically provides information about their products and gives the customer the ability to place orders. More advanced implementations use electronic means for supporting the entire sales and support process including: marketing, product display, merchandising, customer needs assessment, order processing, and many other activities. In most seller-centric solutions, the infrastructure is created and maintained by the merchant. The customer needs nothing more than a browser and/or access to the site.

In a buyer-centric solution, the main focus is on customer or buyer trying to fulfill a need for a product. In contrast to Seller-Centric sites which offer products, a buyer-centric site displays items the buyer would like to purchase—in effect trying to lure sellers. Many of the same capabilities as seller-centric sites are needed such as order management and payment capabilities. In this case, the customer joins or creates an infrastructure focused on fulfilling his needs. The infrastructure typically provides an environment between the trading partners which promotes browsing and comparing products, ordering products, fulfillment, payment, and any needed customer support services. A concentration should be placed on the ease of transactions and information flow. For this reason, sellers may customize their product line to the buyers' specific needs. In a buyer-centric case the buyer provides the bulk of the eCommerce infrastructure. Additional integration and setup mayor may not be required for each trading partner who wishes to participate. Implementations requiring sellers to specially configure or integrate their own systems in order to participate are usually only successful where the buyer has substantial market power in the relationship, as in GM or Ford in buying parts from their suppliers. In such cases, agreements must be made as to what information is to be shared, how to model the information, the standards for messaging and communication, and what technologies will be used. Besides the mechanical hurdle of integrating multiple systems and the somewhat immature state of the software products to date, convincing trading partners to adopt an Internet commerce approach can also be very difficult. If one is not a particularly big or powerful buyer, it can be difficult to attract potential sellers to come to one's site and spend the time necessary to learn about one's needs. This requires sellers to engage in a very different activity than they have traditionally performed and many are not eager to change their way of doing business for a relatively small customer.

This section of the market has been slower to emerge. As mentioned above, trading partner maintenance is a key issue. Companies at the end of the hub must buy into the hub's practices and vision. Future vision and direction are also important. As changes are implemented, all trading partners have to move together.

Getting buy in from all partners has the potential to slow down the adoption of new technologies and process innovations which over time can lead to a lack luster lowest common denominator approach. Broker or auction type solutions are also emerging, albeit more slowly. Broker implementations don't typically sell their own goods, but rather provide an eCommerce environment to facilitate bringing multiple buyers and sellers together. Both buyers and sellers can utilize the broker's site and infrastructure rather than developing and maintaining their own eCommerce capabilities. In this case, a broker has set up the infrastructure needed to buy and sell goods. The infrastructure will be very similar to a seller-centric solution with the addition of components needed to register goods to be sold (or in a buyer-centric twist-register request for quote), price negotiation and bidding and reconciliation services. A Trading Network is an excellent business example of a broker site. Users of the TN can issue Request for Quote's (RFQ'S) on the trading network. The request could be for raw materials, components, or finished items. Suppliers are free to answer a request for a quote providing they meet some basic guidelines and requirements. The network provides a true win-win relationship. Since the network can be global, suppliers the purchaser may never have known about are free to participate. Another example on the consumer side is a sales website. Such a site offers a variety of computer, electronic and fitness goods as well as a general merchandise auction. Customers can browse items in order to view product information and their current bid prices. Interested buyers can place a bid online and see how their bid price compares with others. The auctions are time based and follow a detailed bidding process. As customers are out bid, they are notified via email and have the option to reply with a counter bid.

SUMMARY OF INVENTION

The present invention is generally directed, a method of doing business that includes steps of identifying an owner of property willing to sell his property by an online auction, entering into a contract with the owner obligating him to complete the sales of his property conducted pursuant to the terms of the contract, pre-arranging a minimum auction price for his property that accounts for the owner's interest, plus costs and fees, conducting the on-line auction with a plurality of bidders for his property whereby at the on-line auction's conclusion there is a winning bidder and ensuring the transfer of the winning bidder's funds to the escrow holder.

The first aspect of the present invention is identifying a plurality of owners of a plurality of properties each of which are willing to sell at least one of their respective properties by an online auction and entering into contracts with the owners obligating them to complete the sales of their property conducted pursuant to the terms of the contract.

The second aspect of the present invention is pre-arranging a minimum auction price for his property that accounts for the owner's interest, plus costs and fees and conducting the on-line auction for the property of one of the owners with a plurality of bidders for his property.

In a third aspect of the present invention, the property is a secured promissory note and the method includes the step of arranging for the delivery of the secured promissory note.

In a fourth aspect of the present invention, the method also includes the steps of placing on the auction's Portal relevant information about the secured promissory note and related documents and limiting bidding to bidders who have proven resources to complete the transaction.

Other aspects and many of the attendant advantages will be more readily appreciated as the same becomes better understood by reference to the following detailed description and considered in connection with the accompanying drawing in which like reference symbols designate like parts throughout the figures.

The features of the present invention; which are believed to be novel, are set forth with particularity in the appended claims.

DESCRIPTION OF THE DRAWINGS

FIG. 1 is a block diagram of the three elements, Lender, Bidder and Transaction, respectively of an On-line Loan Auction Flowchart according to the first embodiment of the present invention.

FIG. 2 is a block diagram of the Lender element of the On-line Loan Auction Flowchart of FIG. 1.

FIG. 3 is a block diagram of the Bidder element of On-line Loan Auction Flowchart of FIG. 1.

FIG. 4 is a block diagram of the Transaction element of the On-line Loan Auction Flowchart of FIG. 1.

FIG. 5 is an On-line Loan Auction Flowchart of FIG. 1.

DESCRIPTION OF THE PREFERRED EMBODIMENT

Referring to FIG. 1 the first embodiment of an On-line Loan Auction Flowchart 10 is shown as a block diagram. The block diagram consists of a Lender element 11, a Bidder element 12 and Transaction element 13.

Referring to FIG. 2 in conjunction with FIG. 1 the Lender element 11 includes a first step 21 is to seek Lenders who are willing to auction loans on web portal, a second step 22 is to enter into a contracts with lenders to auction loans and a third step 23 is to enable lenders to enter loan data into an on-line auction system. In the first steps 21 property owners who are willing to sell their property by an online auction are identified. In the second steps 22 property owners enter into contracts. The terms of the contract obligates them to complete sale of their respective properties. The Lender element 11 may also includes the steps of pre-arranging a minimum auction price for each property that accounts for the property owner's interest, attendant costs and fees and conducting an on-line auction with a plurality of bidders for each property.

Referring to FIG. 3 in conjunction with FIG. 1 the Bidder element 12 includes a first step 31 of seeking bidders to register to bid on loans, a second step 32 of having potential bidders register to bid on loans, a third step 33 to market defaulted loans and a fourth step 34 to allow registered bidder to bid on loans

Referring to FIG. 4 in conjunction with FIG. 1 the Transaction element 13 includes a first step 41 of reviewing bids submitted by approved bidders, a second step 42 of selecting winning bid, a third step 43 of informing winning bidder and a fourth step 44 of having winning bidder wire transfer funds to cover his winning bid. The Transaction element 13 also includes a fifth step 45 of opening escrow, a sixth step 46 of distributing auction proceeds to lender and a seventh step 47 of transferring loans title to winning bidder. At the conclusion of the auction there is a winning bidder. The method further includes the step of ensuring transfer of funds from the winning bidder to the property owner.

Referring to FIG. 5 in conjunction with FIG. 1, FIG. 2, FIG. 3 and FIG. 4 the On-line Loan Auction Flowchart 10 is shown in context and integrates the Lender element 11, Bidder Element and the Transaction element 13.

In a second embodiment a method of doing business includes steps of identifying property owners willing to sell their property by an online auction and entering the property owners into contracts. The terms of the contract obligates them to complete sale of their respective properties. The method also includes the steps of pre-arranging a minimum auction price for each property that accounts for the property owner's interest, attendant costs and fees and conducting the on-line auction with a plurality of bidders for each property. At the conclusion of the auction there is a winning bidder. The method further includes the step of ensuring transfer of funds from the winning bidder to the property owner.

The property is a secured promissory note. The method still further includes the steps of arranging for delivery of the secured promissory note to the winning bidder through a licensed escrow holder, placing on an online web site or portal, relevant information about said auction and the secured promissory notes and supporting documents and limiting bidding to only those bidders with proven sufficient resources to successfully consummate the auction.

In a third embodiment a method doing business includes the steps of identifying owners of secured promissory notes willing to sell their secured promissory notes by an online auction and entering the owners into a contract the terms of which obligates them to complete the sales of their respective secured promissory notes. The method also includes the steps of pre-arranging a minimum auction price for the secured promissory note that accounts for the secured promissory note owner's interest and contracted costs and fees, placing on the auction portal relevant information about the secured promissory note and related documents and limiting bidding to bidders who have proven sufficient resources to complete the transaction. The method further includes the steps of conducting an auction for the secured promissory note whereby at the auction's conclusion there is a winning bidder, arranging for the delivery of the original secured promissory note, its security instrument (trust deed or mortgage), the documentation supporting the value of security of the secured promissory note (appraisal), and evidence of ownership (title insurance) to a licensed escrow holder, who at the conclusion of the auction, will deliver evidence of ownership of the original secured promissory note and related documents to the winning bidder and the appropriate proceeds to said note owner and ensuring the transfer of the winning bidder's purchase funds to the escrow holder.

In a third embodiment a method of doing business includes the steps of identifying a plurality of owners of a plurality of properties, each of which being willing to sell at least one of their respective properties via online auction, entering into contracts with the plurality of owners obligating them to complete the sales of their respective property's conducted pursuant to the contracts' terms and pre-arranging a minimum auction price for their respective properties that accounts for interest of the respective owner's, transaction costs and fees. The method also includes the steps of conducting a plurality of on-line auctions for a plurality of properties with a plurality of bidders for the owners' properties. The property is a secured promissory note. The method may further include the step of arranging for the delivery of evidence of ownership of each secured promissory note to the respective winning bidder. The method may still also includes the steps of placing on the auction portal relevant information about the secured promissory note and related documents, limiting bidding to bidders who have proven resources to complete the transaction and the step of holding and completing the auction for a defaulted secured promissory note immediately preceding the foreclosure, trustee, marshal, judicial or any other court ordered sale of the note's underlying security.

In the fourth embodiment a method of doing business includes identifying an owner of property willing to sell his property by an online auction, entering into a contract with the owner obligating him to complete the sales of his property conducted pursuant to terms of the contract; pre-arranging a minimum auction price for his property that accounts for the owner's interest, plus costs and fees, conducting the on-line auction with a plurality of bidders for his property whereby at the on-line auction's conclusion there is a winning bidder and ensuring the transfer of the winning bidder's funds to the escrow holder. A first step is to identify a plurality of owners of a plurality of properties each of which are willing to sell at least one of their respective properties by an online auction and to enter into contracts with the owners obligating them to complete the sales of their property conducted pursuant to terms of the contract. A second step is to pre-arrange a minimum auction price for his property that accounts for interest of the owner, plus costs and fees and to conduct an on-line auction for the property of one of the owners with a plurality of bidders for his property. The third step is to arrange for the delivery of the secured promissory note. The fourth step is to place on the auction's portal, relevant information about the secured promissory note and related documents and to limit bidding to bidders who have proven resources to complete the transaction.

In summary the method includes a first step of the method is identifying a plurality of owners of a plurality of properties each of which are willing to sell at least one of their respective properties by an online auction and entering into a contract with the owners obligating them to complete the sales of their respective properties conducted pursuant to the terms of the contracts and a second step is pre-arranging a minimum auction price for his property that accounts for interest of the owner, plus costs and fees and conducting an on-line auction for the property of one of the owners with a plurality of bidders for his property. The method also includes a third step of the method is arranging for the delivery of the secured promissory note and a fourth steps of the method includes placing on the auction's Portal relevant information about the secured promissory note and related documents and limiting bidding to bidders who have proven resources to complete the transaction.

From the foregoing it can be seen that a method of doing business has been described. It should be noted that the sketches are not drawn to scale and that distances of and between the figures are not to be considered significant.

Accordingly, it is intended that the foregoing disclosure and showing made in the drawing shall be considered only as an illustration of the principle of the present invention. 

1. A method of doing business comprising the steps of: a. identifying property owners willing to sell their property by an online auction; b. entering the property owners into contracts, the terms of which obligates them to complete sale of their respective properties; c. pre-arranging a minimum auction price for each property that accounts for the property owner's interest, attendant costs and fees; d. conducting the on-line auction with a plurality of bidders for each property, whereby at the conclusion of the auction there is a winning bidder; and h. ensuring transfer of funds from the winning bidder to the property owner.
 2. A method of doing business according to claim 1 wherein said property is a secured promissory note and said method includes the step of arranging for delivery of the secured promissory note to the winning bidder through a licensed escrow holder.
 3. A method of doing business according to claim 1 wherein method also includes the step of placing on an online web site or portal, relevant information about said auction and the secured promissory notes and supporting documents.
 4. A method of doing business according to claim 3 wherein method further includes the step of limiting bidding to only those bidders with proven sufficient resources to successfully consummate the auction.
 5. A method doing business comprising the steps of: a. identifying owners of secured promissory notes willing to sell their secured promissory notes by an online auction; b. entering said owners into a contract, the terms of which obligates them to complete the sales of their respective secured promissory notes; c. pre-arranging a minimum auction price for the secured promissory note that accounts for the secured promissory note owner's interest and contracted costs and fees; d. placing on the auction portal relevant information about the secured promissory note and related documents; e. limiting bidding to bidders who have proven sufficient resources to complete the transaction; f. conducting an auction for the secured promissory note whereby at the auction's conclusion there is a winning bidder; g. arranging for the delivery of the original secured promissory note, its security instrument (trust deed or mortgage), the documentation supporting the value of security of the secured promissory note (appraisal), and evidence of ownership (title insurance) to a licensed escrow holder, who at the conclusion of said auction, will deliver evidence of ownership of the original secured promissory note and related documents to the winning bidder and the appropriate proceeds to said note owner; and h. ensuring the transfer of the winning bidder's purchase funds to the escrow holder.
 6. A method of doing business comprising the steps of: a. identifying a plurality of owners of a plurality of properties, each of which being willing to sell at least one of their respective properties via online auction; b. entering into contracts with the plurality of owners obligating them to complete the sales of their respective property's conducted pursuant to the contracts' terms; c. pre-arranging a minimum auction price for their respective properties that accounts for interest of the respective owner's, transaction costs and fees; d. conducting a plurality of on-line auctions for a plurality of properties with a plurality of bidders for the owners' properties.
 7. A method of doing business according to claim 6 wherein said property is a secured promissory note and wherein said method includes the step of arranging for the delivery of evidence of ownership of each secured promissory note to the respective winning bidder.
 8. A method of doing business according to claim 6 wherein method also includes the step of placing on the auction portal relevant information about the secured promissory note and related documents.
 9. A method of doing business according to claim 6 wherein method further includes the step of limiting bidding to bidders who have proven resources to complete the transaction.
 10. A method of doing business according to claim 6 wherein method includes the step of holding and completing the auction for a defaulted secured promissory note immediately preceding the foreclosure, trustee, marshal, judicial or any other court ordered sale of the note's underlying security. 